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26|09|07

Ofcom considers fast broadband outlook and pledges clarity for investors

Ofcom today published a consultation paper analysing the outlook for future broadband “Next Generation Access” (NGA) networks with proposals for future regulation of this new communications infrastructure.

Regulation has contributed to an effective broadband market in the UK.

Broadband access regulation is based currently on creating and supporting a competitive market capable of delivering a range of services from a variety of providers, spanning many price points and available throughout the UK.

Broadband has become a mass-market service, with providers other than BT offering services over 3 million unbundled broadband lines and Virgin Media offering a service to 50% of the country over cable. Consumers have enjoyed falling prices, rising speeds and increasingly innovative product bundles.

In general the picture for broadband take-up in the UK is good:

• over ninety-nine per cent of the UK is connected to a broadband enabled exchange;
• over half of UK households have taken up broadband;
• almost three quarters have a choice of at least two broadband (ADSL and/or cable) network providers;
• the average headline speed has doubled in a year to reach 4.6mb/s and
• broadband prices have fallen by 9% in the last twelve months.

Bandwidth demands are rising

Operators of the current copper-based networks and technologies have already upgraded their technology to deliver faster broadband speeds.

Consumer demand continues for the applications and services supported by these upgrades. To date, the networks have been able to meet this demand and offer sustained improvements.

However, the development and consumption of high speed services means that current generation networks will at some point be unable to deliver the very high speed broadband service that may be demanded by customers.

In the UK operators are considering how best to respond to the continuing growth in demand for bandwidth and the commercial case for significant investment in these new technologies. Ofcom’s consultation highlights how the market and infrastructure conditions in the UK are very different to those countries where investment in fibre has already been strong. The reasons include the relatively mature pay TV market in the UK, the high speeds of current broadband enabled by shorter distances from exchanges and the comparatively high population densities in countries where fibre is advancing fastest.

While the exact nature and timing of demand for very high speed broadband is uncertain, as is the nature of the services that will drive this demand, there is growing agreement that these networks could have profound effects for UK citizens and consumers and the economy.

Regulatory clarity needed to support investment in NGA

As the market evolves, a clear regulatory regime supporting its growth will be key. Its aim will be to ensure that consumers continue to enjoy all the benefits of a competitive and dynamic market and that potential investors have clarity on how their investment will be regulated.

Ofcom proposes to play its part in facilitating timely and efficient investment in very high speed broadband networks with a regulatory policy based on the same principles it established for current generation broadband. Of particular relevance are the principles to:-

• promote competition at the deepest possible point in the broadband value chain, to optimise the opportunities for innovation and sustainable competition
• optimise the scope for innovation to maximise consumer and business benefits from these new services; and
• require equivalence where operators with market power must make their network infrastructure available to their competitors on the same basis.

In addition Ofcom proposes two new principles specific to next generation access networks:-

• regulation must reflect the significant commercial investment risk associated with deployment of these networks in order to ensure incentives for investment are retained; and
• investment in these networks requires regulatory clarity. It is important that the regulatory regime remains in place for a sufficient time to allow investors the long-term clarity they need to invest with confidence.

Ofcom CEO Ed Richards said: “Next Generation Access offers tremendous new opportunities for UK business and consumers, and its potential impact on the economy is very significant.

He added: “Investment in Next Generation Access will represent a substantial commercial risk and the market should decide where and when it will be made. We want to ensure there are no barriers to investment and provide a clear regulatory environment which will help encourage investment.

“But we also want to ensure that the benefits of competition which consumers have enjoyed with current generation broadband can also be achieved as we move to higher speed next generation access.”

The consultation closes on 5 December 2007.

The full consultation is available online at http://www.ofcom.org.uk/consult/condocs/nga/

Ends.

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